CSIS Launches U.S.-ASEAN Strategy Commission

Earlier this month, CSIS launched the U.S-ASEAN Strategy Commission, with a mandate to provide recommendations for a long-term U.S. strategy for Southeast Asia. The Commission Chairmen, Maurice “Hank” Greenberg, Chairman of the C.V. Starr Company, and Secretary William S. Cohen, former U.S. Senator and Secretary of Defense, talk about why the Commission’s work is timely and important:

Uranium and Artillery: North Korean Revelations and Provocations

By Victor Cha and Kathleen Harrington

On November 12, nuclear scientist Siegfried Hecker and his Stanford University colleagues John Lewis and Robert Carlin were taken on a tour of the recently updated Yongbyon Nuclear Complex in North Korea. They were shown an under-construction experimental light-water reactor (LWR), as well as an entirely new facility housing 2,000 centrifuges, machines intended to enrich uranium for the new reactor. Hecker and his colleagues expressed surprise at the sophistication and cleanliness of the new plant, characteristics that were not previously attributed to Yongbyon. After he returned from his trip, Hecker privately informed the White House of these new revelations regarding the North’s nuclear program, which the administration had suspected was continuing despite UN sanctions. Following Hecker’s revelations, North Korea fired scores of artillery rounds on November 23 near Yeonpyeong Island along the Northern Limit Line (NLL) in the Yellow Sea. Two South Korean marines and two civilians were killed in the clash, and the island’s 1,600 residents were partially evacuated.

Q1: What is the purpose of the new facility at Yongbyon?

ASEAN and the Heat of Hot Money

By Chayut “Peko” Setboonsarng, Intern Scholar, Southeast Asia Program, CSIS

In October, Dr. Prasan Traiatvoraku, the Thai Central Bank governor, expressed his concern over competitive devaluation between the United States and China, given what it could mean for ASEAN countries. “When elephants fight,” he said, “the grass is trampled.”

A large amount of funds are flowing into Asia’s currency markets, causing an unwanted appreciation of local currencies. This makes exports less competitive, an unwelcome development for trade-driven nations. Moreover, these investments are fickle and prone to capital flight as relative interest rates change. They are known to create asset bubbles and financial instability.

Nobel laureate Joseph Stiglitz and Indonesian economist and World Bank Managing Director Sri Mulyani have both recommended the use of capital controls to manage the flow. So far Taiwan, Indonesia, and South Korea have responded with capital controls. Even the Bank of Thailand took the plunge, despite a bitter experience with such controls in 2007. It is likely that Malaysia, Singapore and the Philippines will follow suit. Commercial banks, meanwhile, have resorted to using credit-linked notes to work around controls.

It would be best to turn these inflows into more productive long-term investments. Not all inflows are speculative, but it is not always easy to identify the good from the bad. ASEAN’s central bank governors and finance ministers can start by reinvigorating the spirit of the Chiang Mai Initiative and ASEAN integration. Regional cooperation could be helpful in at least two ways:

China in a Difficult Position after Last Two Days in Korea

Kim Jong-il during his visit to Changchun, China, earlier this year. Used under fair use guidelines.

By Bonnie S. Glaser, Senior Fellow, Freeman Chair in China Studies, CSIS

Recent developments on the Korean Peninsula have caught the Chinese off guard and put Beijing in the spotlight, which is something that China always seeks to avoid. North Korea’s attack on Yeonpyeong, a South Korean island, and the revelation that Pyongyang has built a new facility to rapidly enrich uranium undoubtedly are most assuredly worrisome to the Chinese. When Kim Jong Il visited Beijing and Changchun earlier this year, Hu Jintao stressed that their two countries needed to reinforce strategic coordination, including: 1) exchanging views “in a timely manner and regularly on major domestic and diplomatic issues, the international and regional situation, as well as on governance experience;” and 2) strengthening “coordination in international and regional affairs to better serve regional peace and stability.” This was a clear admonishment to Kim that China wanted no surprises, and expected North Korea to refrain from any provocations and to create conditions to resume the six party talks.

How will Beijing react to the DPRK’s latest antics? At the regular briefing, the Chinese Foreign Ministry spokesman voiced China’s concern and called for the “relevant parties” to “do more to contribute to the peace and stability of the Korean Peninsula.” The spokesman judiciously avoided assigning any blame for the attack on the South, saying that “The situation needs to be verified.” This response is very much in line with China’s refusal to condemn North Korea for the sinking of the South Korean naval vessel, the Cheonan, last March.

Hu Jintao’s Visit: Opportunity to Reset the U.S.-China Relationship

By Bonnie S. Glaser, Senior Fellow, Freeman Chair in China Studies, CSIS

A lot of inaccurate information is being published about the Obama administration’s China policy.  U.S. officials are generally disappointed that Beijing has not embraced President Obama’s offer to elevate the U.S.-China relationship through cooperation on global issues of consequence to both countries, but they have not retracted the proposal. Washington continues to try to work with China on a broad range of issues where our interests overlap.  While there is concern about a pattern of more assertive Chinese rhetoric and behavior this past year, there has been no decision to forge an anti-China coalition in concert with China’s neighbors.

U.S. media reports about U.S. policy toward China can lead to mistaken conclusions, however.  The Washington Times reported (Oct. 21) that there is a policy dispute between two factions, the “kowtow” group that favors policies of conciliation and concessions in relations with China and another group that is “sad and disappointed” by Beijing’s refusal to work cooperatively with the United States for the past two years.  A few days later (Oct. 25) the New York Times reported that the Obama administration was “stiffening its approach toward Beijing” and seeking to shape coalitions to pressure China to change its unacceptable policies.  Then the Sankei Shimbun claimed (Nov. 14) that the main purpose of President Obama’s trip to Asia was to issue a warning to China.